South Africa- Market Inquiry Transport Sector

The amendments to the South African Competition Act, (the Act) in 2009 granted the South African Competition Commission (SACC) formal powers to conduct market inquiries. Since then South African business has witnessed a sharp increase in market inquires including: private health care sector, liquefied petroleum gas sector (LPG) as well as the grocery retail market sector.

Fresh off the SACC’s recent conclusion of its market inquiry into the LPG sector, the SACC published a notice in the Government Gazette on 10 May 2017, indicating that it will conduct an inquiry into the Public Passenger Transport sector (PPT Inquiry) which is scheduled to commence on 7 June 2017.

The PPT inquiry, is expected to span two years and will involve public hearings, surveys and meetings with stakeholders which will cover all forms of (land-based) public passenger transport. The SACC indicated in its report that “…it has reason to believe that there are features or a combination of features in the industry that may prevent, distort or restrict competition, and / or to achieve the purpose of the Competition Act”.

Andreas Stargard, who has followed the sector closely since 2013 (when Uber first entered the market), notes that the “SACC’s decision to initiate an inquiry into the PPT sector comes as no surprise”..

As African Antitrust (AAT) had previously reported ‘the “taxi and bus” industry is riddled with collusive behaviour. In light of the fact that most of South Africa’s indigent are fully dependent on taxis for transportation in South Africa and spend a significant portion of their disposal income on taxi fees, this is an issue which needs to be addressed urgently by the competition agencies by acting “without fear, favour or prejudice”’.

From the SACC’s perspective, conducting the PPT inquiry without “fear favour or prejudice” will certainly present its challenges as the sector is renowned for its aggressive operators in what is considered to be a “conflict ridden” industry.

Although the SACC has identified various concerns within this sector, which is complex, there can be no doubt that the SACC’s investigation will have to deal with Uber’s entry into the sector and the hostile and violent resistance which Uber has faced from the ‘metered taxi industry’. Accordingly, it will be most interesting to see how the SACC deals with the broader socio-political issues culminating in physical intimation and violent protests which have plagued the taxi industry.

Andreas Stargard notes further, “this inquiry will be crucial within the current South African context as the effects of rising public transport costs is largely experienced and absorbed by the most marginalized members of the South African society”. It is reported that the costs of public transport is estimated to have more than doubled between 2003 and 2013, with half of the workers using public transport suffering a 40% or more reduction in their hourly wage due to transport costs.

Furthermore, the SACC pointed out, in its report, that only 29.8% of South African households own a motor vehicle, which means that the majority of the population (between 70% and 80%) relies on the PPT sector to get them to and from work, school etc. Accordingly, the PPT sector plays an imperative role in providing meaningful mobility to the majority of the population, which is essential in promoting the broader South African development plan of inclusive economic participation.

Although only the LPG market inquiry is the only formal inquiry to have been concluded to date, a question mark remains over whether market inquiries are yielding effective results sufficient to justify the significant resources which accompany such an inquiry.

Market inquiries are extremely burdensome on the relevant market participants and there does appear to be a risk that market inquiries and the SACC’s resources are being used to promote industrial policies at the expense of promoting competition in the market.